By Thabang Mokopanele

Real estate is set to weaken further next year without the Soccer World Cup to boost infrastructure spending, tourism, midyear retail sales and, most importantly, investor sentiment, says Auction Alliance CE Rael Levitt.

Mr Levitt said yesterday that this year had seen the worst property downturn since the beginning of the recession, which coincided with single-digit interest rates for the first time in more than three decades.

He said SA had followed the trend of North Atlantic countries in which the negligible costs of borrowing had simply not "kick- started" the property market.

According to the auctioneer’s year-end review, historically low interest rates had stimulated entry-level residential homes and tenanted commercial property, but the broader market was weak , particularly at the top end.

"Festive season chatter about property will be more sombre this summer than last, when the World Cup was around the corner. In fact, by June this year, pre- World Cup property optimism had given way to a midyear sobriety as the realities of a lacklustre global economy, constrained bank funding and a stubborn local recovery showed a general drop in property trading and a fall in house prices," Mr Levitt said.

Also, residential property prices are not likely to recover soon, according to two banks.

Figures from First National Bank (FNB) and Standard Bank yesterday revealed sluggish house price increases. But last month’s interest rate cut, which took the prime rate to 9%, the lowest since 1974, is expected to boost the market next year. According to FNB’s house price index, the average house price growth slowdown continued last month.

The index recorded a 3,8% year-on-year increase, slightly lower than 3,9% in October.

The Standard Bank median house price growth eased to 4,8% year on year last month, from 6,5% in October. "In real terms, the median price grew 1,2% year- on-year last month, a relatively sharp fall from the 3,1% gain … in October," its property analyst, Johan Botha, said.

Standard Bank’s median house price decreased to R581000 last month, compared with a revised R593000 in October. "We foresee a further slowdown in house price growth in the next few months," Mr Botha said.

Rawson Properties chairman Bill Rawson said the property sector had to adjust to many difficulties this year. Due to the banks’ lack of enthusiasm for lending, the ultra-low interest rates had not, as yet, stimulated home buying as expected.

Source: Business Day